TransferWise Review

Kristo Käärmann and Taavet Hinrikus(Skype’s first employee) started this UK–based currency exchange company in 2011. As a newer money transfer company, TransferWise enjoys being seen as an upstart that’s shaking up London’s Forex industry. Through extensive press exposure they coined the termed peer to peer (P2P) currency exchange. Their service is similar to a system known as hawala, traditionally employed in under-developed countries where formal banking is prohibitively costly, heavily-regulated, or undeveloped.

Headquartered in London, TransferWise has over 450 employees and offices in New York and Tallinn.

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The company’s P2P concept began when the Estonian founders sought to avoid losing bank charges each time they transferred currency between the UK and Estonia, making a private agreement to deposit their incomes directly into each another’s UK and Estonian banks.

TransferWise is a crowd sourced currency exchange service that relies on extensive investment that began with $1.3 million seed funding. In May 2013 TransferWise secured an additional $6 M in investment, raising an additional $25M in 2014, when Richard Branson joined the investors. An additional $58M followed and as of early 2015, TransferWise had raised a total of $91M in funding.

TransferWise handles more than 300 currency routes and has transferred more than 3 billion GBP since its conception, due largely to the media attention the firm has garnered.

TransferWise’s slogan, ‘The clever way to beat bank fees’ implies that they’re the only currency exchange company with peer to peer exchange service, in fact their competitor Currencyfair uses P2P in combination with traditional exchange practices.

Peer to Peer Exchange

TransferWise’s system for currency exchange is to transfer the sender’s money directly to the recipient of an equivalent transfer going in the opposite direction. Likewise, the recipient of the transfer receives a payment not from the sender initiating the transfer, but from the sender of the equivalent transfer. The company charges €1 or 0.5% (whichever is larger) and up to 1.5% for exotic currency.

Drawbacks of P2P

Newer companies are venture-backed and haven’t established the Forex market’s trust.

Currency rate fluctuations have to be monitored by clients in to lock in the best rates. Exchange rates can’t be predicted with TransferWise, since currency may fluctuate during the time it takes to fund the transfer. (Traditional exchange promises the rate quoted on the day of the transaction.)

P2P has little to nothing to offer business and corporate clients. Ecommerce merchants can use TransferWise app to make one off transfers, but the process is neither as streamlined nor supported as it would be with traditional currency exchange firms.

Because TransferWise matches people who want to send money in each direction and then transfers the funds between their bank accounts at home, the process takes more time than traditional transfers- as much as 4 days- to receive the deposited funds.

Advantages of P2P

For smaller transfer amounts-depending on the market fluctuation, TransferWise’s revolutionary model of money exchange is better than bank rates.

Like traditional exchange institutions, P2P firms are regulated by FCA

Services International transfers to 59 countries.

Website

With just spot transfers, TransferWise’s website is as happy and simplistic as friendly labrador might be because there’s not much information- aside from extolling the P2P model to offer. The feel good crowd sourcing data is all very nice, but, again, when looking for financial products, most visitors want to know what’s on offer for business or corporate clients. Considering the founders have high-tech credentials, more video media would be expected, although the company has opted for cheerful, upbeat branding that seems to shake up a staid industry. No real support for corporate or other business is offered, no doubt because TransferWise caters to straightforward currency transfers.Some nice articles on the blog offer energetic content with articles detailing the ‘new frontier’ of banking as seen by one of the founders.

Our Review

TransferWise is still new out of the gate, initially capitalizing on being a rebel and utilizing the youthful entrepreneurial zeal which gets the company attention, as if they were still beginning a financial revolution. This disingenuous approach does not inspire trust amongst many potential clients who seek partnership in their relationships with their currency support teams in other exchange companies. TransferWise has good rates but doesn’t offer sophisticated tools for individuals and businesses, just transfers. 4 out of 5 stars.

Pros

Cons

Transferwise offers a limited range of services. Without the option of forward options and contracts, clients cannot lock in an exchange rate. They’re quoted the market rate at the time they initialise the exchange, but those quotes are the current market value not the market value on the day they receive their funds. For large purchases-like a home abroad, clients have far more predictability and peace of mind with a range of services not available with Transferwise.